THE NEW WELFARE LAW

by David A. Super, Sharon Parrott, Susan Steinmetz, and Cindy Mann

I. Overview

The welfare conference agreement features deep cuts in basic programs for
low-income children, families, and elderly and disabled people as well as
fundamental structural changes in the AFDC program, the basic income support
program for poor families with children. According to the Congressional Budget
Office, the bill includes nearly $55 billion in cuts in low-income programs over
the next six years.

Nearly all of the $55 billion in savings come from reductions in programs
other than AFDC, with especially large reductions being made in the food stamp
program, the Supplemental Security Income program for the elderly and disabled
poor, and assistance to legal immigrants. Low-income disabled children, working
poor families, and the elderly poor are among those whom the legislation will
adversely affect. While the cuts come primarily from areas other than AFDC,
many AFDC families also will be sharply affected in the years ahead as a result
of the bill's sweeping changes in the structure of the AFDC program. [1]

The bill converts AFDC to a block grant  called the Temporary
Assistance to Needy Families (TANF) block grant  with essentially fixed
funding. States will receive a fixed level of resources for income support and
work programs based on what they spent on these programs in 1994, without regard
to subsequent changes in the level of need in a state.[2]

The bill provides some additional "contingency funds" if need
increases in states, but the contingency funds are likely to prove inadequate if
a recession occurs. Between 1990 and 1992 when unemployment climbed, federal
AFDC expenditures rose $6 billion above the amount expended in 1989. The bill's
"contingency fund," however, includes only $2 billion  or
one-third as much. The contingency funds are likely to run out part way into
the next recession.

Adding to the fiscal pressures likely to result from frozen federal funding
are provisions in the bill that make it possible for states to withdraw
substantial amounts of state resources from basic income support and
work programs for poor families with children and to divert federal TANF block
grant funds to other uses. The bill allows states to withdraw or divert
approximately $40 billion between 1997 and 2002 without such action affecting
the level of federal block grant funds they receive. If state funding is
reduced and federal funds are diverted to other purposes to the extent the bill
permits, basic benefits for needy families and resources for work programs will
fall far short of need.

The new welfare legislation allows states to deny aid to any poor family or
category of poor families. In addition, with some exceptions, the legislation
prohibits states from using block grant funding to provide aid to families that
have received assistance for at least five years. CBO estimates indicate that
between 2.5 million and 3.5 million children could be affected by the bill's
five-year time limit when it is fully implemented, even after the 20 percent
hardship exemption is taken into account. Moreover, states can set time limits
shorter than five years; the time limits  which apply to cash aid and work
slots both  can be of as short a duration as a state wishes. If states
adopt shorter time limits, as some are likely to do, the number of affected
children will be substantially greater.

The bill also includes $28 billion in food stamp reductions. When fully
implemented, these reductions will cut food stamp benefits almost 20 percent,
the equivalent of reducing the average food stamp benefit from its current level
of 80 cents per person per meal to 66 cents per person per meal. These
reductions will affect all food stamp recipients, including the working poor,
the elderly and the disabled.

Included in the legislation is a particularly harsh food stamp provision
that affects poor unemployed individuals between the ages of 18 and 50 who are
not raising children. Under the bill, these individuals will generally be
limited to just three months of food stamp receipt while unemployed in
any three-year period. (Some of these individuals will be able to
receive food stamps for six months while unemployed in a three-year period.)
CBO estimates this provision will deny food stamp benefits to an average of one
million people a month who are willing to work but cannot find a job and are not
offered a workfare or training slot.

This report does not discuss the changes made in the child support
enforcement area. The Center for Law and Social Policy (CLASP) has prepared an
analysis of the changes in this area. To receive a copy of this report, contact
CLASP at (202) 328-5140.

Many of these individuals qualify for no other government benefit except
food stamps. Denying them food stamps will leave them with no safety net at
all.

The bill also eliminates most or all of the safety net for one other group 
legal immigrants. The legislation makes most poor legal immigrants ineligible
for most forms of assistance. In fact, 40 percent of the net savings in the
bill are achieved by denying a wide range of benefits to immigrants, including
poor immigrant children and poor immigrants who are very old or who have become
disabled after entering the United States and can no longer work. All of the
savings in the immigrant area come from denying benefits to legal  not
illegal  immigrants. Illegal immigrants already are ineligible for most
major means-tested entitlement benefits.

The overall size of the food stamp cuts, the structural changes in AFDC, and
the reductions in benefits to legal immigrants remain largely unchanged from the
provisions of the welfare bill that President Clinton vetoed in January. In
several areas, the new bill represents a step backward from the vetoed welfare
bill  for example, the reduction in food stamp benefits for unemployed
adults not raising minor children is far more severe in the final bill than in
the vetoed bill. The legal immigrant cuts also are slightly deeper in the final
bill than in the vetoed version. Furthermore, the vetoed bill would have
allowed states to use TANF block grant funds to provide noncash assistance such
as vouchers to impoverished families with children that hit the federally
imposed five-year time limit but are unable to find employment in the private
sector. The new bill, by contrast, prohibits states from using block
grant funds to provide vouchers or other non-cash assistance to these families.

The bill does include some notable improvements over the vetoed version. It
includes substantially increased resources for child care compared to the vetoed
bill and a larger contingency fund. In addition, the reductions in SSI benefits
for low-income disabled children, while still substantial, are considerably less
sweeping than in the vetoed bill. In the food stamp area, the bill no longer
gives states the option of "opting out" of the food stamp program and
receiving a block grant in its place. The vetoed bill also would have placed a
cap on food stamp expenditures, which would have forced additional,
across-the-board food stamp benefit cuts if the expenditure cap otherwise would
be breached. That cap has been dropped. Finally, the bill assures that
children and parents who currently qualify for Medicaid based on their
eligibility for AFDC will continue to be eligible for Medicaid, regardless of
the changes states make in their welfare programs.

Overall, the bill is expected to have a similar effect on child poverty as
the vetoed bill would have had. In July 1996, the Urban Institute released a
study, based on conservative assumptions, showing that the welfare bill the
House of Representatives approved that month would push 1.1 million children 
and 2.6 million people overall  into poverty. Because the final bill is
largely similar to the House bill, these estimates would change little if
recalculated on the final legislation.

The Urban Institute study also found that the bill would make large numbers
of families that already are poor still poorer. They would fall deeper into
poverty. Specifically, the report found that the House bill would increase the
overall depth and severity of child poverty by 20 percent. (Technically, the
bill would increase the "poverty gap" for families with children by
more than $4 billion, or 20 percent. The poverty gap is the measure of the
total amount of income needed to lift all poor families just to the poverty
line.) Finally, the Urban Institute researchers found that one in every five
U.S. families with children  or 8.2 million families  would see
their incomes fall an average of $1,300 a year as a result of the bill.

Most of the children who would be pushed below the poverty line live in
families with a working parent. Families in which the parents are unemployed
throughout the year and receive only AFDC and food stamps typically have incomes
that already are well below the poverty line. Most of those families would be
made still poorer by the bill.

The assumptions the Urban Institute employed are conservative. As a result,
the study is more likely to underestimate than overestimate the extent to which
the bill increases the number of children living in poverty and makes
already-poor children still poorer. The analysis is based on current economic
conditions; if the country or a region were to suffer a recession, the impact of
the bill on poverty would be larger. In addition, the Urban Institute assumed
all states would adopt a five-year time limit on assistance, the maximum
duration the bill allows. A number of states are planning to institute shorter
time limits. The Urban Institute researchers also assumed that no state would
withdraw state resources from welfare programs in response to the provisions
allowing them to do so. This also is likely to prove too sanguine a forecast.
The researchers noted, in releasing their study, that their assumptions were
optimistic.

These and other aspects of the new legislation are discussed in more detail
below.

II. Cash Assistance, Work and Child Care Provisions

The welfare bill converts the AFDC program, emergency assistance, and work
programs into a single block grant with essentially fixed funding. Under the
block grant, children no longer will have an assurance of receiving basic cash
assistance if they are very poor, their family meets all of their state's
eligibility requirements, and their parents are prepared to participate in a
work program and to meet all work requirements. A state could run out of block
grant funds for the year and place new applicants on waiting lists. Unless
states commit state funds to assure that all eligible families receive aid,
substantial numbers of poor children whose parents are unable to find a job
could be denied assistance, especially during economic downturns.

Many children whose parents are poor and willing to meet work requirements
may be denied assistance for other reasons as well. The bill bars states from
using federal block grant funds to provide cash aid, work slots, or noncash aid
such as vouchers to most families that have received any form of assistance
under the block grant for a total of five years over their lifetime. If a
family receives cash aid or any service funded under the block grant or works in
a workfare slot, subsequently leaves the rolls for employment, and then is laid
off years later, the family will generally be denied all forms of block grant
assistance after the lay-off  even a new work slot or vouchers to help pay
the rent or meet other basic needs  if the cash assistance and workfare
slot it received years earlier totaled five years in duration.

States will be permitted to exempt 20 percent of their caseload from the
time limit provision  that is, 20 percent of a state's caseload may
consist of families receiving aid beyond the time limit. But about half
of the AFDC population currently consists of recipients who have passed the
five-year mark. CBO estimates indicate that by 2004, between 2.5 and 3.5
million children could be affected by the time limit, even after the 20 percent
hardship exemption is taken into account.

Moreover, states will be allowed to make the time limit shorter than five
years. Families complying with their state's work requirements can be cut off
when they reach the time limit their state has established. Such cut-offs can
be applied without regard to whether the parents in the family can find
unsubsidized employment. According to HHS, if all states were to adopt a two-year
time limit, 5.5 million children would be denied aid by 2006, even assuming that
states exempted 20 percent of their caseloads from these state time limits.

Fiscal Pressures Resulting from Federal Block Grant Funding Levels

Among the most profound changes the legislation makes in the welfare area
are its changes in the financing structure of cash assistance and work programs.
Largely as a result of these changes in the programs' financing structures, the
types of welfare policy choices that states make in the future may be quite
different from those they have made or considered in the past.

The TANF block grant in the bill provides essentially fixed federal
funding for income support and work programs, based on a state's past spending
levels on these programs. Over time, these federal funding levels are likely to
prove inadequate.

The Congressional Budget Office projects that the
federal funding allocated under the block grant will fall $1.2 billion short
over the next six years of what states would have received from the federal
government for cash assistance and work programs under those provisions of law
that the new welfare bill is replacing. (This estimate includes the funds that
CBO projects states will receive under the block grant contingency fund.)

This funding shortfall will widen over time. In 1997 and 1998, states
are projected to receive more federal money through the block grant than
they would have gotten under the prior law. But by 1999, federal funding is
projected to fall short of what would have been provided under the prior law.
And by 2002, the funding shortfall is projected to reach more than $1 billion a
year. Moreover, at the same time that federal resources for cash and work
programs will essentially be frozen, the new legislation requires states to
expand greatly their work programs for recipients, thereby adding substantial
new costs. This will exacerbate the funding crunches that states will face. As
explained below, the Congressional Budget Office projects that the funding in
the bill falls far below what is needed to meet the bill's expansive work
requirements without cutting sharply into cash assistance benefit levels.

These problems will intensify during economic downturns when poverty
rises and the number of families applying for aid increases. Under prior law,
federal funding rose automatically to help meet increased needs during
recessions. That feature of federal law is eliminated under the new bill.
While the new legislation establishes a contingency fund to help address
increased needs during recessions, the level of resources placed in the
contingency fund is small.

The contingency fund contains $2 billion
over five years. This represents an increase over the welfare bill vetoed in
January, which provided just $1 billion for the fund. But during the
1990-to-1992 recessionary period, federal AFDC funding increased $6 billion over
the 1989 level. In other words, the additional amount expended in these three
years of the early 1990s was triple the amount the bill allocates for the
contingency fund over the next five years. The $2 billion for the
contingency fund is equivalent to an increase over five years of just two
percent above the basic block grant funding levels. The contingency fund is
almost certain to run out part way through the next recession.

The
bill also includes a small population adjustment fund, which would provide
additional resources to some states with growing populations. The fund would
provide $800 million over four years, an amount equal to an increase in block
grant funds of just one percent over the four-year period. (No population
adjustment funds would be available in 1997 or in years after 2001.) National
population growth is projected to be 4.6 percent between 1997 and 2002, however,
or more than four times greater than the growth in block grant funding allocated
for population growth over this period.

Bill Would Permit States To Withdraw Up to $40 Billion From Income
Support and Work Programs

The foregoing discussion addresses the inadequacy of the federal
funding levels in the bill. These problems are likely to be exacerbated by a
withdrawal of state funds. Like the vetoed welfare bill, the new
legislation permits states to withdraw substantial state resources and divert
federal block grant funds from income support and work programs without losing
any basic federal block grant funds. States will be able to withdraw from these
programs  or to divert to other uses  up to $40 billion between 1997
and 2002.

Under the prior law, the federal and state governments shared in the cost of
providing AFDC benefits and financing welfare-to-work programs. States
contributed between 20 percent and 50 percent of these costs, with wealthier
states contributing a higher proportion of the cost than poorer states. This
financing structure provided states with an important incentive not to
reduce state resources for these programs; if a state withdrew $1 of state
resources from AFDC or work programs, it lost between $1 and $4 of federal
funds.

Under the block grant structure in the new bill, however, this matching
structure is radically altered. To receive its full block grant allocation, a
state will simply be required to contribute overall state funding for work,
income support, and child care programs equal to 75 percent of what it spent on
these programs in 1994. This 75 percent requirement is known as a "maintenance-of-effort"
requirement. The maintenance-of effort requirement is raised to 80 percent for
states failing to meet the work requirements in the bill. [3]

If every state were to spend only what is required to receive its full block
grant allocation, state funding over the next six years would fall nearly
$32 billion below the level that CBO projects states would have spent under
the prior law. This would represent a 33 percent reduction in state resources
devoted to these programs over six years, compared to what would have been
expended under the prior law.

The new legislation also permits states to transfer up to 30 percent of
their federal TANF block grant funds to the Child Care and Development Block
Grant and the Social Services Block Grant. Transfers to Social Services Block
Grant alone may not exceed 10 percent of a state's federal TANF block grant
allocation. [4]

The provision of the new legislation allowing TANF block grant funds to be
transferred to the Social Services Block Grant is particularly problematic. The
services funded under the Social Services Block Grant include an array of
politically popular services, many of which go to the elderly and to families
well above the poverty line. This may make such a transfer of funds likely in a
number of states. But a seepage of funds from the TANF block grant to the
Social Services Block Grant would almost inevitably lead to fewer work slots
being provided for very poor families, cuts in cash benefit levels for these
families even though current benefit levels are already well below the poverty
line in most states, still-shorter time limits, or some combination of such
steps.

(The bill provides that funds transferred from the TANF block grant to the
Social Services Block Grant may be used only for services to children whose
family incomes fall below 200 percent of the poverty line, but this provision is
cosmetic. States could simply shift a portion of their existing Social
Services Block Grant funds from poor children to other populations at the same
time they transferred funds from the TANF block grant to the Social Services
Block Grant. The actual effect could be to transfer resources from the TANF
block grant to serve elderly individuals without children or families with
higher incomes without the state having violated the statute.)

Contingency Fund Remains Inadequate

As noted, the legislation includes $2 billion for a contingency fund to
provide additional resources to states facing growth in the size of their
low-income populations, an amount that could be exhausted quickly after just a
few large states experience recessionary conditions. Once the fund is
exhausted, states must bear themselves 100 percent of the additional costs of
providing assistance to needy families during a downturn. Families in states
that are unable or unwilling to bear these costs may be left without much of a
safety net.

As noted, AFDC costs increased $6 billion in three years during the
downturn of the early 1990s, while the contingency fund contains $2 billion for
use over five years. The fact that the recession of the early 1990s was less
severe than earlier downturns such as the recessions of the early 1980s and
mid-1970s adds to the concern the fund will prove inadequate.

To
qualify for contingency funds, a state must meet certain "trigger"
criteria. States will qualify if their food stamp caseloads increase at least
10 percent over their 1994 or 1995 level or if their unemployment rate is at
least 6.5 percent and also is at least one-tenth higher than the state's
unemployment rate in the same months of either of the two prior years.[5] These
"trigger" criteria could pose a problem for some states. A state
whose food stamp caseload climbs less than 10 percent could experience
significant increases in need without being able to access any contingency
funding. Moreover, in past recessions, many states experienced substantial
increases in unemployment without reaching the 6.5 percent unemployment rate.

The contingency fund also will place states that qualify for
contingency funds for only part of the year at a major disadvantage. The bill
limits the level of resources these states can draw down by severely reducing
the federal matching rate for these states. A state that received $1 in federal
funds for every $1 in state funds spent on AFDC under prior law will be required
to spend $5 in state funds for every $1 in federal contingency funds it can
receive if the state qualifies for contingency funds for four months during
the year. Under the welfare bill vetoed in January, such a state would have
continued to receive $1 in federal contingency funds for each $1 in state funds
it contributed. The extremely high state matching rates that these states will
face may cause some states to fail to access contingency funds during economic
downturns.

Work Initiatives Placed in Jeopardy

As recently as 1994, there was a general consensus that additional resources
were needed if the welfare system was to be converted to a work-based system.
The original Contract with America provided $10 billion over five years in
funding for work programs.

Although the new legislation places states under stringent requirements to
put an increasing proportion of recipients receiving aid under the TANF block
grant in work activities, funding for work programs in the bill falls short of
what is needed to meet the bill's work requirements. CBO projects that the cost
of meeting the work requirements, excluding child care costs, will reach $5.6
billion in 2002. This is $4.1 billion more than the amount that states spent on
their JOBS program in 1994, the principal year upon which state block grant
funding levels are based. Furthermore, according to CBO, the legislation falls
$12 billion short of what will be needed over the next six years to meet
the work requirements, excluding child care costs.

Due to the combined effect of expanded work requirements and frozen federal
funding, federal block grant funding levels are likely to prove insufficient in
many states. In its estimates of the costs and savings associated with the
legislation, CBO assumes these funding shortfalls will cause many states to fail
to meet the bill's work requirements.

States can avoid some of the costs of meeting the work requirements by
reducing their caseloads and serving fewer people. Under a provision in the
bill known as the "caseload reduction credit," a state's work
participation requirements are reduced if its caseload declines below the 1995
level.

For example, the legislation requires that at least 35 percent of a state's
caseload be participating in work activities in 1999. But if a state's caseload
falls by 15 percent between 1995 and 1998, then its work requirement for 1999
will be reduced by 15 percentage points  from 35 percent to 20 percent.
Consider a state that has a caseload of 50,000 families in 1999. If the state
must place 35 percent of its caseload into a work program, it must place 17,500
parents into work activities. If, however, the state's caseload of 50,000
families represents a 15 percent reduction since 1995, the state will only be
required to place 20 percent of its caseload  or 10,000 parents 
into work programs. In such a case, the number of parents required to
participate in work activities would be reduced by 43 percent as a
result of the caseload reduction credit.

This caseload reduction credit offers states a perverse incentive to reduce
their caseloads by rendering groups of families ineligible for aid. Because no
new resources are provided in the bill to pay for a substantial expansion of
work programs, states may find it easier to cut their caseloads by altering
eligibility rules (or creating barriers to receiving aid) than by mounting work
programs that prove effective in moving families into unsubsidized employment.
The legislation provides that states should not get credit for caseload
reductions caused by changes in state eligibility rules, but the legislation
places the burden of proving that caseload reductions have been caused by
eligibility rule changes  rather than by effective state work programs 
on the Secretary of Health and Human Services. In a number of cases, HHS may
find it difficult to prove that eligibility changes have caused caseload
declines.

It should be noted that even states that do not constrict their eligibility
criteria may see the requirements to place substantial portions of their
caseloads in work programs eased substantially during the next few years. AFDC
caseloads have been falling recently; currently, all but two states have smaller
AFDC caseloads than in fiscal year 1995. As a result, although the bill says
states are supposed to place 25 percent of their caseloads in work programs in
1997, some 29 states actually will have to place fewer than 20 percent of their
caseloads in work programs in the coming year.

Child Care

The legislation eliminates three current child care programs and replaces
them with a single child care block grant. The programs that would be replaced
are: the program which funds child care assistance for AFDC families that work
or are participating in a work or training program; the "at-risk"
child care program for working poor families that are at risk of slipping onto
the AFDC rolls if they do not receive child care assistance; and the child care
program that assists families making the transition from welfare to work.

Under the prior law, AFDC parents with young children who needed child
care assistance in order to work or participate in work or training programs
were entitled to such assistance, with the costs states incurred in providing
such assistance being supported by the federal government on an open-ended
entitlement basis. The federal government provided states with matching funds
for these child care costs, with no limit on the federal matching funds a state
could receive. The new legislation repeals the entitlement of such families to
child care assistance. It also repeals the open-ended federal matching
structure and caps the federal child care funding each state can get. To be
sure, the legislation prohibits states from imposing a sanction on families with
children under the age of 6 if the parent in the family cannot participate in
work or training programs because affordable child care is not available. But a
parent who cannot participate in a work or training program because of a lack of
child care assistance still may reach a time limit and be cut off aid. Thus,
such a parent could be cut off without having had access to work preparation
assistance.

Similarly, prior law provided a guarantee  or
entitlement  to transitional child care assistance for families in their
first year after having left AFDC for employment. Here, too, the federal
government provided matching funds to states for this assistance on an
open-ended entitlement basis. The new legislation repeals both the entitlement
of these families to transitional child care aid and the entitlement of states
to these open-ended federal matching funds.

The legislation
replaces these two open-ended funding mechanisms  along with the federal
funding provided under the "at risk" child care program, which already
was capped  with a new child care block grant. The block grant contains
more funding than CBO projects states would have received under the three child
care programs being replaced; the child care block grant also contains more
child care money than would have been provided under the welfare bill President
Clinton vetoed in January. But this does not mean the new bill reduces unmet
needs for affordable child care. As noted, the legislation requires states to
place much larger numbers of recipients in jobs or work programs than states
would have placed under prior law. As a result, the legislation greatly
increases the need for child care.

Beginning in 1999, the
Congressional Budget Office projects that the child care funding in the bill
would fall short of what would be needed both to meet the bill's work
requirements and to maintain current levels of child care assistance for
low-income working families not receiving assistance funded by the TANF block
grant. If states meet the bill's work requirements by placing parents in work
programs rather than by reducing caseloads, child care funding will, by 2002,
fall $1.8 billion short of what would be needed to meet the work requirements
while maintaining current assistance levels for the working poor. On the other
hand, if states fail to meet the work requirements, meet the requirements in
part by cutting caseloads rather than placing parents in work programs, or
escape the requirements through the use of waivers, the child care funding
shortfall might not materialize. CBO forecasts that states will not draw down
all the federal child care funding available to them under the legislation.

The Child Care Funding Structure

There has been much confusion around the issue of child care funding under the
welfare bill, with some claiming the bill increases child care funding
relative to current law. Such claims are a bit misleading.

As noted, the bill would convert two currently open-ended funding streams 
child care for AFDC recipients who work or participate in a work or training
program and "transitional child care" for those who have just left
welfare for work  into a block grant with capped funding. Under the
open-ended programs, states have been permitted to draw down as much child care
funding as they needed. Under the new child care block grant structure, states
will be permitted only to draw down a capped level of funding. The bill thus
limits the amount of child care funding states may draw down.

States would have spent less on child care under the old law than they are
projected to spend under the new legislation. This is the basis used by those
who argue the bill increases child care resources. The "increase,"
however, is due to the increased need for child care created by the
bill's greatly expanded work requirements. If the bill's work requirements were
put in place and complied with and the child care programs were allowed to
remain open-ended matched programs, the amounts that states could spend on
child care would be higher than the level of funding the bill provides.

In short, transforming open-ended entitlement programs to a block grant that
caps the level of resources that states can draw upon for child care assistance
does not represent a liberalization of child care funding.

The Effect of Waivers on Implementation Requirements

States that are currently operating their AFDC program under a federal
waiver, as well as states that secure approval from the Secretary of Health and
Human Services for a pending or new waiver request prior to the date of
enactment of the welfare bill, can operate their welfare programs under the
terms of these waivers until their waivers expire. [6]

The bill specifically provides that the requirements the bill places on the
program a state operates with federal block grant funds shall not apply to the
extent such amendments are inconsistent with a state's waiver. The bill does
not elaborate on how to evaluate whether a waiver is inconsistent with a
provision in the bill, nor does it specify who has the authority to make this
judgement. It is unclear how this language will be interpreted and whether
states that are currently operating their program under a federal waiver will
have to meet the work requirements as well as other requirements outlined in the
bill. Many states may try to argue that their waivers envision a work program
different from the one mandated under the bill.

It does appear that states with waivers will not be required to change their
systems to conform with all of the features of the bill to the extent that the
state's waiver already addresses the issue. For example, if a state has already
imposed a time limit on the receipt of aid and has adopted exemptions and
extensions applicable to its time limit, it would appear that the 20 percent cap
on exemptions to the sixty-month time limit would not have to apply to that
state.

Basic Protections for Children

States will, as noted, have broad discretion to maintain, broaden or
substantially curtail eligibility for basic income assistance for any category
of poor families with children. States can choose to deny aid to families with
teen parents, for example. States also will, once again, be permitted to deny
aid to two-parent families. All current federal rules governing AFDC
eligibility criteria, application procedures and the appeal process are
repealed.

The legislation contains a provision directing states to include objective
criteria for determining eligibility and treating families equitably in their "state
plans," the documents that states must prepare describing the program they
will fund under the block grant. States also must include a description in
their state plan of how recipients adversely affected under the program can
appeal such actions. But the legislation prohibits the U.S. Department of
Health and Human Services from taking any action if a state either fails to set
objective or equitable rules for its program. The legislation even bars HHS
from acting if a state fails to follow its own rules for its new program.

Medicaid Rules Affecting AFDC Families

Children and parents who receive AFDC are automatically eligible for
Medicaid under current law. Since the block grant eliminates any guarantee
that these children and parents would be eligible for assistance under the TANF
block grant, their Medicaid coverage also could have been placed at risk.
Without specific provisions to prevent loss of Medicaid coverage, many children
over age 13 and parents who lose assistance due to time limits or other welfare
restrictions imposed under the block grant would have lost Medicaid coverage at
the same time. [7]

This risk of loss of Medicaid coverage was averted, however, by changes made
in the welfare legislation in its final weeks. The legislation was amended to
require states to provide Medicaid coverage to all families that meet their
state's July 1996 AFDC income and asset standards, as well as those AFDC rules
that limited AFDC primarily to single-parent families (i.e., the "deprivation"
rules). Under the new bill, eligibility for Medicaid thus is linked to a
state's AFDC rules in these areas as of July 1996 and not to receipt of
aid under the new TANF block grant. [8] This change assures that several
million parents and older children continue to receive Medicaid regardless of
the changes a state makes in its welfare programs. The bill also maintains
transitional Medicaid assistance, which provides coverage when families find
employment or secure child support. [9]

III. Food Assistance

Half of the bill's spending reductions come from the food stamp program.
Including reductions in food stamp benefits for legal immigrants, the food stamp
cuts total $27.7 billion over six years. [10] Although the final bill
eliminated the option for states to convert the food stamp program to a block
grant, it replaced that option with deeper cuts in the regular food stamp
program. The food stamp cuts in the bill are $9 billion  or 47 percent 
deeper than those contained in the Administration's welfare proposal.

When fully implemented, the bill would slice food stamp benefits almost 20
percent, the equivalent of reducing the average food stamp benefit from its
current level of 80 cents per person per meal to 66 cents per person per meal
(in 1996 dollars). A substantial portion of the food stamp benefit reductions
come in the form of across-the-board benefit cuts that will affect all
recipients, including families with children, the working poor, the elderly, and
the disabled. Only about two percent of the food stamp savings in the bill come
from provisions to reduce fraud and abuse, impose tougher penalties on
recipients who violate program requirements, or reduce administrative costs.

Children and very poor families will among those significantly affected,
since they are the program's primary beneficiaries. About two-thirds of the
benefit reductions will be borne by families with children. In 1998, the first
full year the cuts will be in effect, the nearly seven million families with
children that receive food stamps will lose an average of $435 in food stamp
benefits.

Working poor families also will be affected. The 2.3 million food stamp
households with a worker will lose an average of $355 in 1998, rising to $465 a
year by 2002.

Hardest hit are the poorest of the poor  those with incomes below half
of the poverty line (below $6,250 for a family of three). They will absorb 50
percent of the food stamp cuts in the bill. In 1998, they will lose an average
of $655 per year in food stamp benefits. By 2002, these households will lose an
average of $790 per year. The elderly would be adversely affected as well.
The 1.75 million low-income elderly households receiving food stamps would lose
about 20 percent of their food stamp benefits.

Food Stamp Cut Affecting the Unemployed

Among the food stamp cuts in the bill is what is probably the single
harshest provision written into a major safety net program in at least 30 years.
The provision limits food stamps to most unemployed individuals between the
ages of 18 and 50 who are not raising minor children to three months while
unemployed out of each 36-month period and allows no hardship exemptions to this
limit. After three months, these individuals can continue receiving food stamps
only if they are working at least half-time or in a workfare or training slot.
The bill provides no new money for workfare or training slots, however, which
are quite scarce in the food stamp program.

CBO estimates that in an average month, one million jobless individuals
who are willing to work and would take a work slot if one were available would
be denied food stamps under this provision because they cannot find work and
no workfare slot is available. This provision marks the first time in the
history of the food stamp program that individuals will be terminated from the
food stamp program because no work opportunity is made available to them, not
because they have refused to work.

USDA data show that more than 40 percent of those who would be affected by
this provision are women. Nearly one-third are over the age of 40, an age above
which individuals with limited skills often have difficulty finding jobs
quickly, especially when unemployment is high. Many of these individuals
qualify for no other benefits because they are not raising minor children; food
stamps is the only safety net they have. The inclusion of this provision in the
bill is one major reason that the poorest of the poor (i.e., those below half of
the poverty line) are the group hit hardest by the bill's food stamp cuts.

Under the bill, unemployed individuals who exhaust their three months of
benefits and later find a low-wage job and remain poor will continue to be
denied stamps until after they have worked one full month. Under some
circumstances, an individual who has received food stamps for three months while
jobless, subsequently finds employment, and then is laid off can receive a
second three months of benefits while unemployed. Receipt of a total of six
months of benefits while unemployed during the 36-month period is, however, the
maximum allowed. CBO estimates that only about two percent of those affected
will receive this second three-months of benefits.

This provision is far harsher than a provision in the welfare bill vetoed in
January. The vetoed bill would have limited food stamps for unemployed
individuals to four months out of each 12-month period. [11]

This provision can be suspended, upon request of a state, if the local
unemployment rate surpasses 10 percent. That is a level of unemployment few
areas of the country reach even during recessions. Of greater significance,
states also may waive the provision, with USDA approval, for individuals who
reside in an area that "does not have a sufficient number of jobs to
provide employment for such individuals." It is not yet clear how this
waiver authority will be applied.

This provision will cause hardship among individuals who have worked and
paid their taxes but then lose a job due to a recession, a plant closing, or a
company downsizing and cannot find a new job in three months. This provision is
likely to hit particularly hard at unemployed workers in small towns or rural
areas who lose their jobs when a plant closes, relocates, or downsizes, since
there may be only a limited number of new employment opportunities in their
area.

The Administration's welfare bill, the House bipartisan welfare bill (known
as the Castle-Tanner bill), and the Senate Democratic welfare bill all would
have limited food stamp assistance to this group of individuals to six months
out of each year while unemployed but would have required that these individuals
be offered workfare slots. People who refused to work would be terminated, but
people would not be cut off without being given an opportunity to work. The
final welfare legislation charts a very different course from that.

In other food stamp areas, the bill reflects a recommendation the governors
made to remove a provision of the vetoed welfare bill that would have imposed a
cap on federal food stamp expenditures and would have triggered additional
across-the-board cuts in food stamp benefits if food stamp expenditures
otherwise would have exceeded the cap. But the bill does not include the other
principal food stamp recommendation the governors made. The bill vetoed in
January would have repealed a provision enacted in 1993  and scheduled to
take effect shortly  under which some families with children that pay more
than half of their incomes for housing were to receive a larger food stamp
benefit in recognition of the limited funds they have left for purchasing food.
The governors recommended retaining rather than repealing this provision, but
the new bill largely ignores their recommendation. When announcing he would
sign the welfare bill, President Clinton singled out this provision of the
legislation as one that ought to be changed; Clinton said the food stamp
provision enacted in 1993 that would benefit families with high housing costs
ought to be retained rather than discarded.

States Permitted to Change Food Stamp Benefit Structure

Although, as noted, the final legislation does not allow states to convert
the food stamp program to a block grant, it includes three other features that
give states wide and unprecedented discretion to make changes in the food stamp
benefit structure. The effect of these features is likely to be the emergence
of substantial state-to-state differences in the program's structure.

First, the bill allows a state to make substantial changes in the rules used
to determine the level of food stamp benefits provided to families that receive
assistance under their state's TANF block grant. States will be allowed to use
the same methods of defining income in their food stamp programs as they use in
their TANF program. They also will be allowed to redesign the food stamp
deduction structure for families receiving aid under the TANF block grant.
States must continue to use the same food stamp maximum benefit level (i.e., the
benefit level based on the thrifty food plan) and several other basic food stamp
rules. USDA is required to approve a state's plan to make such changes, unless
the changes are likely to increase federal costs. [12]

Second, the bill substantially expands food stamp waiver authority. Under
the old law, USDA could waive administrative requirements that states found
burdensome but generally could not grant a waiver that would result in a
reduction in food stamp benefits for any group of households. The new waiver
authority sweeps away that restriction and allows waivers of most, but not all,
provisions of the Food Stamp Act. States will be able to use the waiver
authority to make major changes in the food stamp benefit structure. The waiver
authority covers all food stamp households, including those that do not
receive aid under the TANF block grant.

The new provision distinguishes between statewide waivers and waivers that
cover only a modest part of the state. No statewide waiver may cause
more than five percent of a state's food stamp households to lose more than 20
percent of their benefits, excluding benefit losses resulting from noncompliance
with a work or other behavioral requirement the state has established. Waivers
that alter the benefit structure to such an extent that more than five percent
of the households would lose more than 20 percent of their benefits can be
mounted, but they may not cover more than 15 percent of the state's caseload.
No waiver  whether statewide or limited to part of the state  may
cause categories of households or individuals to be made ineligible for food
stamps for reasons other than lack of compliance with a work or other behavioral
requirement.

A number of states may use the new flexibility the legislation grants to
make innovative changes in their food stamp programs. Nonetheless, the result
is likely to be a food assistance safety net whose strength varies substantially
from state to state and possibly from one group to another within a state.

Finally, the bill contains a range of new state options. States may
terminate benefits for custodial parents who do not cooperate in collecting
child support and for non-custodial parents who either do not cooperate with
child support agencies or fail to make required child support payments. States
will be allowed to impose more severe sanctions on those violating work
requirements than the penalties federal law otherwise establishes. Also, a
state can elect to require use of a "standard utility allowance"
that it has established as a proxy for a household utility costs. Under the old
law, households whose actual utility costs exceeded the standard utility
allowance could have their actual bills used. (Utility costs are used in
determining the amount of a household's food stamp shelter deduction.) Under
the new legislation, states may decline to allow use of actual utility bills in
such circumstances.

Child Nutrition Reductions

The welfare bill includes $2.9 billion in reductions in child nutrition
programs. More than 85 percent of these reductions would come in the Child and
Adult Care Food Program, which primarily supports meals provided to children in
child care centers and family day care homes. The bulk of these reductions
would result from reduced federal support for meals served in family day care
homes that are not located in a low-income area or operated by a low-income
provider.

The family day care home component of this program is the sole part of any
major child nutrition program that is not means-tested. Approximately
two-thirds of the expenditures for this component of the program go to support
meals served to children with family incomes exceeding 185 percent of the
poverty line.

To avoid requiring family day care homes to implement a means test, which
could prove administratively burdensome, the bill divides family day care homes
into two categories: 1) those either located in low-income areas (defined as
areas where at least half of the children have incomes below 185 percent of the
poverty line) or operated by low-income providers (providers with incomes below
185 percent of the poverty line); and 2) those neither located in low-income
areas nor operated by low-income providers. Homes in the first category will
continue to receive current levels of federal support for the meals they serve.
For homes in the second category, the meal reimbursements they receive will be
cut approximately in half.

This represents a sharp reduction in support for homes in the second
category, although the meal reimbursements they receive still will be
substantially higher than the reimbursements the federal government provides for
meals served to middle-income children in schools and child care centers. Homes
that are in the second category but that serve some low-income children will be
allowed, but not required, to administer a means test and to continue receiving
the current rates of reimbursement for meals they serve to children with incomes
below 185 percent of the poverty line.

All major Democratic and Republican welfare bills contained a similar
provision. Most bipartisan and Democratic bills reduced the meal reimbursement
rates for family day care homes in the second category by modestly smaller
amounts than the final bill does, however.

The welfare bill also shaves reimbursement rates for meals served in the
Summer Food Service Program for Children, which provides lunches and some other
meals to children in low-income areas during summer months. On the one hand,
summer food operators will receive as much as 20 cents less per lunch under the
new bill than they currently get. On the other hand, the Summer Food Program
has historically provided quite high levels of meal reimbursement; when the cut
takes effect, summer food operations still will receive 16 cents to 17 cents
more per lunch than schools receive for lunches served under the school lunch
program during the regular school year.

The legislation barely touches the school lunch program. Its only change in
this area is that federal reimbursement rates for school meals served to
middle-income children will be rounded down to the nearest whole cent instead of
being rounded to the nearest quarter cent (e.g., a school might receive 17 cents
rather than 17.5 cents in federal funding for such a meal). This effectively
reduces federal support an average of one-half cent per lunch for children with
average incomes of about $50,000 a year. It should have no noticeable effect on
the school lunch program.

The final legislation drops a provision included in the vetoed bill that
would have given seven states the option of converting the school lunch and
breakfast programs to block grants on a demonstration basis. That provision
likely would have had little appeal to states since it would have required any
state opting to participate in the block grant demonstration to accept large and
growing funding cuts while offering those states less than full flexibility. It
is unclear any state would have volunteered. The governors themselves
recommended dropping the provision for this block grant demonstration, and the
provision was removed from the bill.

IV. Denying Assistance to Most Legal Immigrants

The new welfare bill cuts benefits for immigrants by more than $22 billion.
All of these savings come from denying benefits to legal immigrants. As
noted, illegal immigrants already are ineligible for most major entitlement
programs.

Most poor legal immigrants will be denied aid provided under basic programs
such as the Supplemental Security Income program for the elderly and disabled
poor, Medicaid, and food stamps. Language in the conference report accompanying
the bill also would deny to legal immigrants the assistance provided under many
smaller programs such as meals-on-wheels to the homebound elderly and prenatal
care for pregnant women.

Among the most severe provisions are those that will affect the ability of
poor elderly and disabled legal immigrants to receive SSI. The legislation
makes all legal elderly and disabled immigrants  except for refugees and
asylees during their first five years in the country and a few other very small
groups of legal immigrants  ineligible for SSI in most cases until they
become U.S. citizens. [13] For many poor immigrants who are old or disabled and
can neither work nor, given their age or physical or mental condition, learn all
that is necessary to obtain citizenship, this is tantamount to a denial of
benefits for the rest of their lives. Nearly half a million current elderly and
disabled beneficiaries who are legal immigrants will be terminated from the SSI
program in the months ahead.

The food stamp restrictions are identical to the SSI provisions. All legal
immigrants, except refugees and asylees in their first five years here and a few
other small groups of immigrants, are made ineligible for food stamps until they
become citizens. The welfare bills that both the House and Senate passed in
1995 would have exempted very old legal immigrants and severely disabled legal
immigrants from this ban on food stamp receipt, but the final bill contains no
such exemptions. Such immigrants will have both their SSI and their food stamps
terminated.

These harsh SSI and food stamp restrictions will affect substantial numbers
of legal immigrants with no other sources of support. Most indigent elderly and
disabled immigrants who are here legally but have no sponsor will be denied SSI
and food stamps. So will poor elderly and disabled immigrants whose sponsor has
died or become impoverished. And while the vetoed bill would have given poor
legal immigrants currently receiving assistance one year to find other means of
subsistence before cutting off their SSI and food stamp benefits, the final
legislation cuts these individuals off more rapidly than that.

The new welfare bill also denies Medicaid coverage to many legal immigrants.
Except for refugees, asylees, and a few others, immigrants entering the country
after the date the bill is signed will be ineligible for Medicaid for five
years, with states having the option to extend this Medicaid ban for a longer
period. The Congressional Budget Office estimates that by 2002, approximately
260,000 elderly legal immigrants, 65,000 disabled people, 175,000 other adults,
and 140,000 children who would be eligible for Medicaid under current law will
be denied it under these provisions of the new legislation. Most of these
individuals are likely to have no other health insurance. Among those who will
be affected by these Medicaid restrictions are poor legal immigrants who become
disabled after entering the country, are unable to continue working, and cannot
afford what will be prohibitively expensive private insurance policies given
their medical conditions.

Many legal immigrants already in the country also will lose Medicaid. Many
poor elderly and disabled individuals receive Medicaid as a result of receiving
SSI. When these immigrants are cut off SSI, many will lose Medicaid eligibility
as a consequence.

In addition, the legislation gives states the option of denying Medicaid to
legal immigrants already in the country (except recently arrived refugees and
asylees and a few other narrow categories). On January 1, 1997, states may
begin terminating coverage to these additional groups of legal immigrants
currently receiving Medicaid.

The legislation's rules for legal immigrants under the TANF block grant are
identical to its restrictions on their eligibility for Medicaid. Those entering
the country after the bill is enacted are ineligible for aid under the TANF
block grant for five years, with states having the option of making the period
of ineligibility longer. States also have the option of making legal immigrants
already in the country ineligible for aid under the TANF block grant and setting
the period of ineligibility at whatever duration they choose.

The bill creates state options for the treatment of immigrants in other
areas as well. For example, the bill gives states the option of making some
categories of legal immigrant pregnant women and children  and all illegal
immigrant pregnant women and children  ineligible for WIC. (Currently,
this is one of the few programs for which poor illegal immigrants may qualify.)
But states that elect this option will have to bear additional state costs.

An extensive body of research demonstrates that the provision of WIC
benefits to pregnant women sharply reduces the incidence of low birthweight and,
as a result, significantly reduces Medicaid costs after birth. [14] If
immigrant women are denied WIC during pregnancy, Medicaid and other government
programs are likely to end up paying substantial sums for Medicaid and related
services needed by children who are born at a low birthweight due to denial of
WIC assistance. These children will be entitled to Medicaid  they will be
U.S. citizens since they will have been born on U.S. soil. As a result, states
that elect to deny WIC to these immigrants are likely to lose federal WIC
dollars while incurring higher state costs in their Medicaid programs.

Finally, the legislation gives state and local governments broad authority
to deny assistance to legal immigrants under state and local programs. State
and local governments also would be prohibited from using their own funds to
provide many kinds of assistance to illegal immigrants and to some small
categories of legal immigrants.

V. Supplemental Security Income for Disabled Children

The vetoed welfare bill would have made two major changes in the SSI program
that would have affected disabled children. First, the bill would have denied
SSI benefits completely to a large number of children who qualify as disabled
under current guidelines. Second, it would have reduced benefits by 25 percent
to most of those disabled children who remained on the program.

The new bill contains the first set of changes but drops the second 
it substantially reduces the number of disabled children receiving benefits but
does not reduce benefit levels for those remaining on the program.

The Congressional Budget Office estimates that by 2002, some 315,000
low-income children who would qualify under current law will be denied SSI.
This represents 22 percent of the children who would qualify under the old law.
The bill reduces the total benefits the program provides to disabled children by
more than $7 billion over the next six years.

The bill achieves these results by restricting the types of disabilities
that will enable a child to qualify for SSI. In some instances, the same
disability that will qualifies an adult for SSI will not be sufficient to
qualify a child for benefits. Among the children most likely to lose benefits
are those suffering from multiple impairments, no one of which is severe enough
to meet the more stringent disability criteria established by the bill, but the
combined effect of which is substantial.

There is widespread agreement that the criteria for determining whether
children are sufficiently disabled to qualify for SSI should be tightened. The
legislation, however, goes well beyond the steps needed to address the problems
that have been demonstrated. A National Academy of Social Insurance panel
reported last year, in an exhaustive study it conducted of the children's SSI
program, that while "eligibility criteria need to be strengthened, ...
allegations of widespread inappropriate allowances are not substantiated and
sharp cuts in the current rolls are not warranted." [15]

The Academy proposed three specific changes: eliminating "maladaptive
behavior" as a separate element in assessment of children's disability,
increased use of standardized tests to measure mental disorders, and
restructuring individual functional assessments of children's disability under
criteria that would better balance mental and physical impairments. The changes
the bill makes go far beyond the Academy's measured proposals.

VI. Other Changes

The bill also makes changes in the Social Services Block Grant and the
Earned Income Tax Credit. The bill reduces federal funding for the Social
Services Block Grant by 15 percent, from $2.8 billion per year to $2.38 billion
per year. The bill also includes a series of small changes in the Earned Income
Tax Credit, largely recommended by the Clinton Administration. These changes
are designed to reduce EITC errors and curtail EITC receipt by those whose
income is appears low as a result of "paper" losses in income. The
EITC changes in the welfare bill do not include any of the controversial EITC
cuts from last year's reconciliation bill that would have caused hardship for
needy low-income working households.

VII. Conclusion

The overriding effect of the legislation is likely to be a large increase in
poverty, especially among children and legal immigrants. The effect of a block
grant structure that only partially responds to increases in need, combined with
reductions in federal resources, options for states to reduce benefits and
services in various ways, and fiscal incentives for states to withdraw
substantial amounts of state funding from income support and work programs, is
likely to be that substantial numbers of poor families with children are left
with inadequate assistance.

As noted, the Urban Institute projected the House version of the bill would
push an additional 1.1 million children  and a total of 2.6 million
people, including adults  into poverty. [16] Most children who would be
pushed below the poverty line are in families that are already working; in most
cases, their families would be pushed into poverty by the food stamp cuts or a
loss of benefits because they are legal immigrants. The provisions of the House
bill that were central to the Urban Institute's analysis were changed only
slightly in the final legislation.

In addition to increasing the number of children who are poor, the bill will
make many children who already are poor still poorer. The Urban Institute study
estimated the House bill would increase the "poverty gap"  the
measure of the amount of income needed to lift all poor families to the poverty
line  by one-fifth for poor families with children. No piece of
legislation in U.S. history has increased the severity of child poverty so
sharply.

Other groups among the poor  including the working poor, the elderly
and disabled, and legal immigrants  stand to lose as well. For some, the
safety net will grow weaker. For others, especially poor legal immigrants and
poor unemployed adults not raising minor children, much or all of the safety net
is eliminated.

A recent international study found that while the average income of affluent
U.S. children is higher than that of affluent children in all other western
industrialized nations, the average income of poor children in the United States
is already lower than that of poor children in 15 of the other 17 western
nations studied. It is against this backdrop that the welfare bill  and
its expected effects in increasing the extent and depth of child poverty 
should be considered. This is one international competition in which the United
States can not take pride in its performance.

Footnotes

1. This report does not discuss the changes made in the child support
enforcement area.

2. To be precise, a state's TANF block grant allocation would be based on
the highest of its FY 1994 spending, its FY 1995 spending, or the average of its
spending for the three years from FY 1992 to FY 1994.

3. To draw down funds from the contingency fund, a state would have to
maintain state funding at 100 percent of its 1994 expenditure level.

4. The $40 billion estimate of the amount that states could withdraw in
state funds or divert to other uses is based only on states' ability to reduce
state spending due to the maintenance-of-effort provision as well as the
provision permitting states to transfer funds from the TANF block grant to the
Social Services Block Grant. Resources transferred to the Social Services Block
Grant can easily be used to supplant state social services spending. The
resources that states would be permitted to transfer to the child care block
grant are not considered in this analysis since these resources can not
as easily be used to supplant state spending.

5. The bill includes substantial food stamp cuts that would cause some
current recipients to become wholly ineligible for food stamps. The contingency
fund trigger directs the Secretary of Agriculture to adjust states' 1994 (or
1995) food stamp caseloads to reflect the size the caseload would have been had
these food stamp cuts been in effect at that time.

6. States that have applied for a waiver prior to enactment of the bill and
whose waivers are approved after enactment of the bill but prior to the bill's
implementation also may follow the terms of those waivers, except that these
states must comply with the work requirements in the bill.

7. Children under 13 would not be affected because under federal Medicaid
law, children born after September 30, 1983 whose family income is below the
federal poverty line must be covered under Medicaid without regard to their
eligibility for welfare.

8. States will be permitted, however, to terminate Medicaid for any adult
whose cash aid under the TANF block grant is terminated due to a refusal to
work. Children and pregnant women are exempt from this provision. It is
unclear in this context precisely what "refusal to work" will mean;
the Secretary of Health and Human Services may need to issue guidance clarifying
this issue.

9. Eligibility for transitional Medicaid will be triggered whenever a
family's income from earnings or child support places it above the income
standards for Medicaid eligibility which will be based on the state's former
AFDC income eligibility thresholds. For those families that are placed above
the income standards due to increased child support income, eligibility for
transitional Medicaid will be limited to four months; those families that
surpass the income limits due to increased earnings will be eligible for up to
12 months of transitional Medicaid as under prior law.

Under the new
law, eligibility for regular Medicaid coverage will not depend on
receipt of block grant assistance but will instead be based on the income
eligibility standards of states' former AFDC programs. Similarly, when a family
becomes ineligible for Medicaid coverage under the new law due to increased
earnings or child support income, it becomes eligible for transitional Medicaid,
regardless of whether the family received assistance under the block grant.

10. This total includes $3.8 billion in cuts in food stamp benefits for
legal immigrants and their families, $3.7 billion of which are in the immigrant
title of the bill. This total also includes $345 million in reductions from
freezing the food stamp standard deduction for fiscal year 1997. This standard
deduction cut appears both in the welfare legislation and in the agricultural
appropriations bill for fiscal year 1997. Because Congress gave final passage
to the agricultural appropriations bill shortly before the welfare bill, CBO has
attributed the $345 million in savings from this cut to the appropriations bill
and has not included it in the CBO tables showing the savings in the welfare
bill. Either way, however, food stamp households will feel the effect of this
cut. The aggregate figures for the bill's spending reductions used in this
analysis include the effect of freezing the standard deduction in fiscal year
1997. The $27.7 billion figure excludes the effect of a provision in the bill
that increase food purchases for The Emergency Food Assistance Program (TEFAP)
by $600 million over six years. If the TEFAP increase is included, the net
reduction in food stamps and TEFAP is $27.1 billion. The net reduction,
excluding the food stamp cuts in the immigrant title of the bill and the
increased funding for TEFAP, is a little over $23 billion, a figure sometimes
cited for the food stamp reductions in the bill.

11. Under the provision in the vetoed bill, people finding work at low
wages would have requalified immediately, and those who requalified but then
lost their jobs would have been able to receive a second four-months of benefits
while out of work.

12. USDA may not disapprove a state's plan to make such changes to
households in which all members receive assistance under the state's TANF block
grant, unless the change is projected to increase federal costs. States must
secure USDA approval for changes that affect "mixed households" (i.e.,
households in which some members receive aid under the block grant and some do
not); USDA is not required to approve those changes.

13. Another small category of immigrants similar to refugees and asylees,
persons granted "withholding of deportation," also are exempt during
their first five years in the United States. In addition, the bill also exempts
legal immigrants who are active duty members of the United States Armed Forces
or honorably discharged U.S. veterans and their spouses and unmarried dependent
children. Finally, the bill creates a narrow exemption for immigrants who have
worked 40 quarters  10 years  in this country. For any quarter
after 1996 to count, an immigrant must not have received any federal
means-tested benefits during that quarter.

14. The General Accounting Office estimated in 1992, based on an exhaustive
review of the research literature, that each dollar expended on WIC services for
pregnant women averts approximately $3.50 in subsequent costs, primarily because
it lessens the need for costly intensive health care after birth by reducing the
incidence of low-weight births.

15. National Academy of Social Insurance, Restructuring the SSI
Disability Program for Children and Adolescents (May 1995), pp. 32-33.

16. As noted above, in the Urban Institute's analysis, the income measure
used included the value of noncash benefits such as food stamps and the earned
income tax credit.